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post #1 of 3 Old 05-01-2009, 12:27 PM Thread Starter
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Chrysler Bankruptcy Details

Chrysler Bankruptcy: Central Wrap-Up

Chrysler was the second largest automaker between 1936 and 1949. It was acquired by Daimler-Benz in 1998, and suffered from poor management and lack of investment until being sold to Cerberus Capital Management. A combination of economic, political, marketing, and product issues short-circuited Cerberus' rapid work on correcting Daimler’s mis-handling of Chrysler; and, while the government was glad to lend trillions of dollars to financial institutions, politicians demanded that President Bush, and then President Obama, allow Chrysler and General Motors to go into an unassisted bankruptcy. Bush made interim loans over the objections of his party leaders, and Obama worked on forming deals to preserve Chrysler and GM. Bankruptcy would have been avoided, but three lenders refused to accept the Treasury's deal, which was admittedly draconian.

The three lenders were Oppenheimer Funds, Perrella Weinberg Partners, and Stairway Capital.

The bankruptcy may be brief, with the White House and Chrysler expecting a sale of core assets within 60 days. Legal expenses are likely to be $1,000 per hour per attorney, with a possibility of losing major assets or, if customers do not rely on government-backed warranties, liquidation if sales plummet and delays occur.

The bankruptcy court judge has approved payments to employees and dealers, incentive payments, and honoring of warranties.

Court papers are available at Chrysler’s site, chryslerRestructuring.com.

Chrysler will sell its principal assets to a new company under Section 363 of the Bankruptcy Code. The new company will, if plans are maintained and no other company outbids them, be the result of the alliance with Fiat and will have the Chrysler, Dodge and Jeep brands, as well as most of Chrysler's current employees and production facilities. Chrysler's current employees will become employees of the new company.

The Treasury will provide up to $3.5 billion in debtor-in-possession financing, and $4.5 billion in exit financing; the Canadian government will provide around $800 million and get 2 percent of Chrysler's equity. $280 million has already been transferred to a program that guarantees Chrysler's warranties, so customers can be more confident in buying cars from a company in bankruptcy.

The Fiat deal has been finalized and signed. A new board of directors will be created by Chrysler, the government, and Fiat, and Bob Nardelli will return to Cerberus as an advisor once the new company is created; Tom LaSorda will retire during the initial bankruptcy proceedings.

Arthur Gonzalez, one of the nation's most experienced bankruptcy judges, will oversee the bankruptcy proceedings for Chrysler. He handled both Enron and WorldCom's bankruptcies simultaneously; he has a favorable reputation and considerable experience in high-profile cases. The sale of key assets to the Treasury is expected to come very soon in the case, with other decisions possibly continuing for years.

Chrysler will pay $2 billion to its secured creditors. Its unsecured creditors, who are mainly parts suppliers and the BBDO Detroit advertising agency, may be paid more immediately in some cases, depending on what the judge allows.

The top unsecured debtor is Ohio Module Manufacturing, which presumably supplies Jeep components, and is owed $70 million. Ad agency BBDO Detroit was at #2, with $58 million owed. Many of the top ten debtors are instantly recognizeable to Chrysler fans - Johnson Controls (interior parts), Continental Automotive (electronics, ABS, brakes, and more), Cummins, Visteon, New Process, and Denso. Also included are Comau of Michigan and Germersheim Spare Parts of Germany.

GMAC will be the preferred lender for Chrysler’s consumer loans.
Production and plant closings

The newly renovated Sterling Heights Assembly Plant, which makes the Avenger and Sebring, will be closed in or before December 2010. Conner Avenue, Detroit Axle, St. Louis North, Kenosha Engine, and Twinsburg Stamping will also be closed and sold. Sterling Heights will not be included in the New Chrysler but will be leased to it.

Conner Avenue and St. Louis North are not surprising candidates to be left out of the "New Chrysler" since St. Louis has already been closed and Conner Avenue's sale was announced some time ago. Some have expected Twinsburg to be closed as well, and Kenosha production will be replaced by a new Pentastar V6 plant.

From Monday, May 4, through the sale of the “good Chrysler assets,” all Chrysler plants will be closed, though employees will keep their health benefits. If the process takes longer than the expected 60 days to create a new Chrysler holding company, some limited production may restart. During this period, Chrysler will cut its marketing budget by 50%, given that there will be no production.
Companies covered in the petition

sebring96hbg provided a link to Chrysler's actual bankruptcy petition.

Companies covered include Chrysler LLC, Chrysler Aviation, three Dutch divisions, the Chrysler Institute of Engineering, three international corporations, Chrysler Motors LLC, Chrysler Realty, the service contracts companies, Chrysler Technologies Middle East, Chrysler Transport, the vans business (Sprinter), Dealer Capital, GEM (electric cars), NEV, Peapod, TPF Asset and Note, and Utility Assets LLC.

Chrysler’s Mexican, Canadian and other international operations are not part of any bankruptcy filing.
Plan for the new company

As per Bob Nardelli:

When the transaction is completed, the Voluntary Employee Beneficiary Association (VEBA) will own 55 percent of the new company and the U.S. and Canadian governments will own proportionate shares of a 10 percent stake. Fiat will initially hold a 20 percent ownership stake in Chrysler. Fiat will have the right to increase its ownership stake an additional 15 percent in three increments as it meets the following criteria: 5 percent for bringing a 40 mpg vehicle platform to Chrysler to be produced in the U.S.; 5 percent for providing a fuel-efficient engine family to be produced in the U.S. for use in Chrysler vehicles; and 5 percent for providing Chrysler access to its vast global distribution network to facilitate the export of Chrysler vehicles. Fiat cannot become a majority owner until after all U.S. government loans have been completely repaid.

The UAW’s VEBA will not having voting rights, according to prior reports, so Fiat will have a controlling interest unless the VEBA is able to sell its share, and the buyers are given voting rights.
Betrayal by Cerberus

Though the Cerberus people tried to portray themselves as patriots rescuing a great American automaker, in the end, Steve Feinberg did not invest his own money to rescue the company from bankruptcy, and tried to link up with numerous Chinese companies. While in some cases the sales would have made sense, for example trying to sell parts and the Newark paint shop to Chinese automakers, they also appear to have tried to sell large parts of the company itself, and appear to have been willing to break up Chrysler despite constant statements that they were keeping the company whole.

Tom LaSorda, in his court statements, wrote:

Chrysler sent letters to parties, primarily in China, whom we thought would be potentially interested in purchasing our assets. Over the next two months, several companies, including Beijing Automotive Industry Holding Co., Tempo International Group, Hawtai Automobiles, and Chery Automotive Co., expressed interest in purchasing specific vehicles, powertrains, intellectual property rights, distribution channels and automotive brands.

Rumors surrounding an attempted sale to GM, which would have been disastrous for employees at both companies but would have kept assets in the United States, appear to be true; LaSorda wrote that Nardelli himself called Rick Wagoner in January 2009 to try to restart the merger. GM was not interested.

LaSorda said that Chrysler tried to form alliances with Nissan, GM, Volkswagen, Tata Motors, Magna, GAZ, Hyundai, Honda, and Toyota. The alliance with Toyota suggested by LaSorda and Jim Press would have had Toyota using Chrysler factories to build new products. Toyota quickly rejected the proposal, as did Honda.

Talks with Nissan started in 2007, as rumored. In 2008, Nissan and Chrysler exchanged term sheets, but Nissan could not get the needed financing. They tried again later in 2008, with executives from both companies, but were unable to nail down financing; in January 2009, Nissan was no longer interested.

Talks with Fiat apparently began in March 2008, and were more fruitful.

"All wranglers are jeeps, not all jeeps are wranglers"

"Holding out for the Pentastar in 2012"
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post #2 of 3 Old 05-01-2009, 06:11 PM
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I am glad Jeep was not sold to a Chinese company...

2007 Jeep Wrangler X, Auto, Hardtop, White, Superchips Flashpaq, 2" OME HD springs, Rusty's Adj. F/R trac-bars, Bilstein Steering Stabilizer, JKS Quicker Disconnects, JKS Rear Swaybar Extensions, PolyPerformance UCAs f/r, Rusty's LCAs f/r, 33x12.5 BFG KM2s, ProComp 15x8 Rockcrawlers, Smitty winch, Body Armor Front Bumper, FLW SS rear bumper, OEM Rubicon Rock Rails, Skid Row Engine and Tranny Skid, Member UFWD & BRC, †John 3:16†
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post #3 of 3 Old 05-01-2009, 07:47 PM Thread Starter
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Me too.

"All wranglers are jeeps, not all jeeps are wranglers"

"Holding out for the Pentastar in 2012"
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